Australia proposes crypto exchange regulation with existing laws

Australia today released a proposal to regulate digital-asset services platforms as the country steps up efforts to “provide clarity” and “protect customers.” The Australian Treasury said in a consultation paper that failures and vulnerabilities of these platforms have “increased the need to regulate to protect consumers.”

The government plans to leverage existing Australian financial services laws. It intends to require platforms with a certain threshold of assets — AU$1,500 ($948) for an individual or AU$5 million ($3.2 million) in aggregate — to obtain an Australian Financial Services Licence.

Specifically, the regulators also seek to apply certain obligations, including setting up standards for custody software and requirements when transacting in tokens. The proposal would also apply additional obligations for activities, including trading, staking, tokenization and fundraising.

The consultation for the document closes on Dec. 1, 2023.

“The Treasury has today released a consultation process, which is pleasing to see,” Jonathon Miller, managing director of Kraken Australia, told The Block. “Australia is now in the unfortunate situation where our regulation has taken a very long time, so we’re taking the approach of shoehorning crypto into existing financial services regulation. We’re behind our global peers when it comes to implementing a crypto framework, so I appreciate the need to have something in place locally to provide certainty to platforms like ours.”

Miller said that the approach, however, creates ample opportunities for the regulation to ignore the nuances of the technology. “I’m hopeful that we can work collaboratively with the Government to make sure we don’t snuff out the benefits of future innovations in crypto that might fall outside the conventional ‘financial services’ box,” he added.

Angela Ang, senior policy advisor at blockchain intelligence firm TRM Labs and a former regulator at the Monetary Authority of Singapore, said in a social media post that the Australian government’s proposal is “a thoughtful way to apply existing legal and regulatory constructs to crypto assets that take into account their unique characteristics, as well as alignment to international standards.”

Some banks in Australia have become increasingly cautious about the risks of potential crypto scams. In July, National Australia Bank said it had blocked some payments to “high-risk” cryptocurrency exchanges to protect its customers. In June, the Commonwealth Bank of Australia also took measures to limit its customers' ability to send money to crypto exchanges due to crypto-related scams.